Forum - Euro's Third Down Leg (Topic)

Xaron

Munich, Germany

Posts: 528

15 years ago

Dec 18, 2009 11:51

Why I think the Dollar will continue to weaken in 2010:

Let's make some assumptions about the money flows for 2010 regarding the Dollar.

So we have on the Dollar demand side:

USD demand (which would support the Dollar) due to:
1) technical corrections within the primary down trend for the Dollar
2) interventions from central banks (more likely if the Euro reaches 1.55+ levels)
3) unwinding of carry trades

As I don't see any systemic risks like in 2008 I think that "safe haven" argument don't count as the Dollar can't be seen as safe haven any longer.

USD supply (which would support non dollar currencies like the Euro) due to:
1) appreciation in value on toxic US portfolios at european banks because of better economic condition and stabilization of the financial system.
2) interest rate differentials (I expect the ECB to hike in march 2010 and continue up to 2.00% till end of 2010 where the FED might hike in H2 earliest if they even hike 2010 at all)
3) a growing US trade and current account deficit
4) diversification from central banks into other currencies
5) the primary USD down trend (just technical again)

That's what I see. Have I forgot something?

Xaron

Munich, Germany

Posts: 528

15 years ago

Dec 18, 2009 11:39

spec, where shall that huge demand for the Dollar come from? Do you think because of huge risk aversion like in 2008? I think we will see some Dollar strength in 2010 as well but still stick to my target of 1.6x levels in Q1 2010 and see a low border of 1.40 in Q2.

I still don't see that necessary demand for the Dollar next year. As far as I know the US has to refinance $2 trillion within the next 12 months. I doubt they will find enough foreign buyers for that amount. So the only option is printing more money and let the FED buy its own treasury stuff...

speculator

Posted Anonymously

15 years ago

Dec 18, 2009 10:38

90 by april. 80 by year end. it would be vicious as i warned and unexpected.

remember, track dxy not anything else although dxy is highly correlated with euro/usd due to majority weighting in index. so the fall of euro against dollar is likely to drag the other majors along and unwind the carry trade.

rim

Turkey

Posts: 121

15 years ago

Dec 18, 2009 10:28

Spec,

DXY is already around 78 , do you expect it will reach 90 and when ?

speculator

Posted Anonymously

15 years ago

Dec 18, 2009 10:05

the strategists are ron rosen and nadeem wayalat. But nadeem gave up when the index went below 75 and he negated his dollar uptrend due to the break. The problem with him is that he thinks he can perfectly time markets which is not possible. But now he is back with his original elliot wave forecast of a rally as it hit 77. Confused is the word but it just shows that u cant JUST use technical analysis for medium term. But the DXY didnt bottom that far off at all in percentage terms.

speculator

Posted Anonymously

15 years ago

Dec 18, 2009 9:45

ashraf,

its partly elliot wave theory really. but not just that. not long ago the dollar was bearish at record (oct-nov) levels and i am a true believer of contrarian theories as i studied these trends at cass business school. if you remember just a couple of weeks ago, even jim rogers anounced he is going long dollar now because everyone is so bearish on it. when there are very few left to make into dollar bears..the market can only go one way.

there were many days where i said 75 is a very key level and a break below could indicate further falls but that this should be the bottom.

but, my liquidity story was my own projection and i have not read that anywhere. i did see back in september that the dollar should rise rapidly during nov/dec which would coincide with the fed reducing liquidity and tightening would come much earlier than most saw. the clues came with credible threats from usa and rest of the world that they also want a strong dollar.

TG

Singapore

Posts: 112

15 years ago

Dec 18, 2009 9:37

Specs, between you and Mr Ashraf there is quite a fair amount of " food for thought", now how to capitalise on them! Tks guys. ( Its all about timing to hold :)

Ashraf Laidi

London, UK

Posts: 0

15 years ago

Dec 18, 2009 8:01

hey spec, care to share with us how high the USD will rally according to that strategist that you told me about a while ago. cheers

Ashraf

jjstone

Toronto, Canada

Posts: 45

15 years ago

Dec 17, 2009 19:56

Good Job A man:)$$

speculator

Posted Anonymously

15 years ago

Dec 17, 2009 19:50

the fed will start to raise rates earlier than what dollar bears and dollar borrowers initially priced in which is what i was constantly warning about.

i mentioned that fed will rally sharply when fed annouce liquidity cutbacks towards end of november and that they would not extent as they reach their reflating objectives and ensured that the financial system was back in order.

I also mentioned that DXY was about to bottom at approx 75 and it bottomed slighly less. but some question this recent rally and think it is just shortlived because of duba, greece etc and profit taking. but in my opinion its a start of a new trend which will reverse much of the DXY's multi-month decline.

The theme of next year will less positive than the second half of this year as investors will now fear a hike in rates. This will put downwards pressure in gold demand and all risky assets in particular gold and oil.

The dollar carry trade is also huge and will certainly impact stocks in the first quarter of next year as a minimum.

Soverign credit worthiness will certainly influence the dollar and eurolandproblems will keep benefiting the dollar as there are very few major currencies that can take the liquidy of money markets apart from the yen after the euro but that isnt a reserve currency.

sterling is also overpriced by about 7% on many levels. the credit ratings of the uk will also be tarnished in 2010 which will send sterling down BIG time against dollar in particular.